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The leading global provider of secure on-demand technologies & solutions for games & edutainment The leading global provider of secure on-demand technologies & solutions for games & edutainment software By Ari Last Business Development 2004 December 2

What is Games-on-Demand? 3 What is Games-on-Demand? 3

Commercially Deployed Go. D Services Europe North-America 4. 7 M BB 5. 5 M Commercially Deployed Go. D Services Europe North-America 4. 7 M BB 5. 5 M BB Turn. Key ROW 2. 1 M BB 200 K BB Turn. Key France 3. 4 M BB 2. 5 M BB 890 K BB 365 K BB 1. 7 M BB 1. 2 M BB 4

What is causing interest in games? A huge market opportunity 2003 video games market What is causing interest in games? A huge market opportunity 2003 video games market = $28. 5 B Bigger than music or movies Consumer migration to online delivery of paid entertainment content – Forrester predicts 33% drop in music CD sales by 2008 Broadband uptake is soaring Games are NOT like Music or Movies Recognize P 2 P threat & opportunity Can implement anti-piracy solutions Market Expansion Opportunities New audiences New business models 5

Online Gaming Market Overview Gaming Technologies: Web Internet-purchase only PC CDROM Xbox live! (? Online Gaming Market Overview Gaming Technologies: Web Internet-purchase only PC CDROM Xbox live! (? ) Future – console, PDA MMOG Gaming Technologies: End-Devices PC Console (Proprietary, high royalties) Set-top boxes (still not here…) Home Entertainment Centers 6

The timing is great for PC games services The industry is facing critical times The timing is great for PC games services The industry is facing critical times 11% decline in unit sales from ’ 02 to ’ 03 (NPD) 30% decline from ’ 01 to ’ 02 (ESA) 14% decline in revenue from ’ 02 to ’ 03 (NPD) ’ 03 US PC Games $1. 2 B, 52. 8 M Units (ESA, NPD) Concentration of purchasing on smaller number of titles Revenue per purchase is decreasing Game development costs are increasing Higher reliance on hit titles But – end of a console generation cycle 7

The timing is great for PC games services Publishers have a great opportunity to: The timing is great for PC games services Publishers have a great opportunity to: Find ways to increase revenue per unit Encourage repeat sales/build relationship Better leverage investment in brand Open additional channels Provide prolonged game life Provide a console-like experience (vs. PC-like experience) Reduce risks 8

Broadband Service Provider Benefits Increased ARPU Decreased churn Increased adoption rate Service differentiation Leverage Broadband Service Provider Benefits Increased ARPU Decreased churn Increased adoption rate Service differentiation Leverage network – justify broadband 1. Don’t succumb to piracy and turn games into huge bandwidth hogs that pay nothing Ability to create bundles, promotions Increased e-commerce revenue Why are PC games more attractive than consoles? 1. Ability to control user experience and branding on the end-user device 2. Tie the user to the BSP, not just on the access service 9

Publisher Benefits Reach new markets Women, non-gamers Extend product life cycle Leverage back-catalog Lower Publisher Benefits Reach new markets Women, non-gamers Extend product life cycle Leverage back-catalog Lower risk of new title launch Low-cost distribution Create new release windows NY Times, August 22, 2004: “To combat the problem, publishers are – again, in Hollywood fashion – scrambling to develop secondary revenue streams. One is online games: selling subscriptions to play on the Internet” Movie Life Cycle 25% Box-Office 50% DVD / VHS / BB / HBO / Vo. D 25% Broadcast TV 10

Publisher Benefits Develop end-user relationships Direct marketing campaigns Optionally establish direct service relationships Improved Publisher Benefits Develop end-user relationships Direct marketing campaigns Optionally establish direct service relationships Improved DRM and security Leverage existing & new business models Subscription, purchase, rental, try/buy Up-sell Overcome the vicious circle of retail becoming ineffective for PC games 11

Value to End Users Great dollar value Access to dozens of games for the Value to End Users Great dollar value Access to dozens of games for the price of a few. Package includes something for everyone. Ultimate user experience Easy pay-and-play Resolve compatibility and conflicts Big games – faster delivery and time-to-play, no install No need to be an expert – casual audience CD-key, multi-player support CD play equivalent Patching Reduced “buyer risk” Users can try games and find the ones they like 12

Watch for these Go. D service features: Delivery Security Usability Comfort Flexibility 13 Watch for these Go. D service features: Delivery Security Usability Comfort Flexibility 13

Go. D Streaming Delivery Game can execute after brief initial download (about 5 -20% Go. D Streaming Delivery Game can execute after brief initial download (about 5 -20% of game) “Just-in-time” delivery of game data, based on prediction algorithms. Remainder of game is “streamed” in the background to the end-user PC, based on predictive profiling algorithm that maintains original game experience No source code needed; no adaptation work required from the game developer 14

Go. D Security Only a partial copy of the game is actually delivered (unlike Go. D Security Only a partial copy of the game is actually delivered (unlike music/video) Full protection on all game files, not just the executable Support for any publisher-required CD media protection or Gold Master Enables all standard DRM plans: Try, Rent, Subscribe, Buy 15

Go. D Usability No installation – click-and-play HW/SW detection / conflict resolution Disk space Go. D Usability No installation – click-and-play HW/SW detection / conflict resolution Disk space management Local cache is managed based on same profile used to deliver game Same user experience as if the software is fully installed (over 1000 games tested) 16

Go. D Flexibility All business models are supported, including: Subscription Purchase Rental Slots Membership Go. D Flexibility All business models are supported, including: Subscription Purchase Rental Slots Membership Try-before-you-buy Multiple models mean a service provider can pick the one most suited to its strategic goals 18

Subscription vs. Download Services Online Service Online Store Online (SP dependency) Offline (SP agnostic) Subscription vs. Download Services Online Service Online Store Online (SP dependency) Offline (SP agnostic) Subscription (mostly BB) Full downloads (dial-up/BB) Recurring (low churn): 10% One-off (low returns): 0%-30% 3% of site visitors subscribe during Y 1 1%-2% of trial users purchase Builds uniqueness and loyalty No uniqueness or loyalty Opt for bundling, up-selling, crosspromoting N/A Subscriber value: 11 x 15 = ~$160 Non-direct value is a lot higher User value: 20 x 1. 3 = $26 Anti-churn effect N/A Strengthening the value of broadband Not strengthening broadband offering Prove the VAS offering Yet another channel/revenue stream 19

Profile of a Successful Service Provider Year 1 achievements: 2. 5% - 3% penetration Profile of a Successful Service Provider Year 1 achievements: 2. 5% - 3% penetration rate of broadband subscribers 8% - 10% usage in bundled model 15$/month subscription <8% churn rate Gaming users are 75% less likely to churn than regular broadband subscribers Life time value of a customer > $150 Acquisition costs < $10 65%-80% conversion of 2 -weeks trial Avg. number of monthly hours spent – 30 Take up rate of 0. 4%/month or more 20

Bell Canada – Games. Mania 21 Bell Canada – Games. Mania 21

Yahoo! Games on Demand 22 Yahoo! Games on Demand 22

RCN Inter. Action 23 RCN Inter. Action 23

Thank you! 24 Thank you! 24